Predicting Effective Compensation Practices in Emerging Asian Countries: A Comparison of the Fit between National Culture and Compensation Practices

This study aims to find effective compensation practices for Korean multinational companies (MNCs) to fit the desires of local employees in the emerging Asian countries of Vietnam, Malaysia, and Indonesia. National culture and compensation practices are closely related to each other. Data were collected from interviews with the staff of three Korean MNCs stationed in each country and documents from the human resources department of each company. For cross-cultural comparisons, we used secondary data from Hofstede’s indices. The results indicated that the match (fit) between compensation practices and national culture is essential to reducing the turnover rate in emerging markets. Vietnamese and Malaysian employees prefer compensation based on individual performance, whereas Indonesians do not. If performance-based rewards do not reflect the cultural characteristics of each country, the turnover rate will increase. Proper compensation practices are suggested to keep local high performers from seeking employment elsewhere.